Finance: Fight to the death?

Long-term survival is the challenge at Cipfa: radical reform seems to be the only way to achieve it. Paul Gosling reports
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A harsh wind of change is blowing across the Chartered Institute of Public Finance and Accountancy (Cipfa). The organisation is being re- shaped, senior managers have been discarded, internal disagreements have surfaced, and rumours abound that Cipfa wants to sell off some of its income-generating activities.

The man overseeing this revolution is David Adams, who in April became director, and whose job is now being re-styled chief executive. When he was appointed, Mr Adams suggested that his role was one of ensuring continuity, though insiders say that his remit was explicitly to reform Cipfa. Noel Hepworth, the previous, widely respected director, is now being privately criticised for allowing the organisation to become over-ambitious, and grow too large.

Cipfa's annual income in 1997 was pounds 19m, but it suffered a pounds 400,000 deficit. Management committee members were warned last year that they must take urgent remedial action. The result was a pounds 50,000 review, undertaken by KPMG, which recommended wholesale reform.

At the heart of these changes has been the replacement of seven divisions by four directorates. The health, local government and technical divisions were merged into a single policy and technical directorate under the management of the former technical head, Martin Evans. Out went other divisional heads, Chris Grimes for health and David Thomas for local government, as well as Chris Stewart at revenue services.

The other remaining directorates are corporate services (to administer the institute and provide member support), education and training, and managed services. There has been speculation that Cipfa might abandon its directly provided education and training role, selling off its regional colleges, and instead outsource its training provision. Cipfa's spokesman says there is no question of this happening, that education and training is a core Cipfa function and will continue to be an integral part of the institute.

The managed services directorate, though, is another question. This new arm brings together the income-generating elements of Cipfa: Competition Advisory Service, the revenue service and the Institute of Public Finance. Managed services will operate outside Cipfa, as a wholly-owned associate company.

Moving managed services into an arms-length relationship should avoid problems with the Charity Commissioners, after concerns were expressed internally at the amount of commercial activity being conducted by Cipfa, a registered charity. However, the partial externalisation of managed services will do nothing to put employees' minds at rest at the direction that Cipfa is taking. Cipfa's 250 staff now feel insecure - 20 have already lost their jobs - and there has been a big increase in union membership. Mr Adams has increased these worries by refusing to reassure staff that there would be no further job losses on the grounds that he "did not wish to bring any false hopes of a future easier life", as he explained to a consultation forum.

Staff with a long memory are aware that the institute willingly grasps opportunities to earn income by disposing of commercial activities. Capita, a large management consultancy specialising in advice to the public sector, was a Cipfa sell-off, while CSL, another consultancy, was a management buyout from Cipfa before it was purchased by Deloitte Touche.

A spokesman for Cipfa dismissed talk of a disposal of the managed services directorate, saying "there is no thought of selling it off at this stage".

Cipfa says that however rough the review may be for its staff, there was no alternative to a radical overhaul. The spokesman explained: "The review was driven by the need to refocus and review where the public sector market-place is going, and ensure that Cipfa is going in the right direction. On the financial side we had to ensure that the organisation is operating as efficiently as possible.

"Public services face constant change, and organisations servicing it must face change to change with it."

The key question, though, is whether Cipfa's reforms will enable it to service members more efficiently. Discordant voices within the institute believe that the integration of the specialist local government and health divisions into the technical directorate will leave the institute weak and vulnerable in providing members with the specialist support they demand.

There can be no doubt that Cipfa will emerge in the short term financially stronger. But no one knows better than the chief executive and the management committee that the real challenge is longer-term survival. With merger talks abandoned, it may be a fight to the death between the accountancy institutes.

Cipfa is still the most important public finance accountancy body, but that may not be permanent. Both the Chartered Institute of Management Accountants and the Association of Chartered Certified Accountants want to become the pre- eminent body for public sector accountants, and are fighting hard to win over new accountancy students. It is those students who will decide which of the institutes emerges the strongestn